Do you love your home, or do you want to sell it? In today’s market, it’s well-known that you want to be a seller – your home will likely sell quickly, at a higher market value, and obtain offers that are well above the market price. However, that raises an interesting question – is it worth renovating your home right now so you can love it for a long time, or should you just sell it and buy one that fits your current and long-term needs?
Should You Renovate Your Home?
Home renovations are a great way to continue to love your home and to make sure it will sustain your needs for years to come. However, remodels and renovations can be extremely expensive.
Renovating a house costs $10 to $60 per square foot on average. The total cost for home renovations is, on average, $46,891. Those prices vary based on location and the rooms you are renovating. For example, kitchens and bathrooms cost the most to renovate and remodel, while bedrooms and living rooms are considerably cheaper. Also, renovations in urban areas are also more expensive than in rural locations.
There are many factors and multiple variations that contribute to the bottom line, including:
- Size of each room
- Underlying problems
- Cost of materials
- Extent of the remodel
Estimating costs on how to remodel a house is a daunting task. Appliances, cabinetry, and any structural repairs top the list of expenses with labor following closely behind.
Why Renovations Might be a Problem
You may be thinking at this point, “renovations are expensive, but why is this a problem if I can sell my home for more money?” It’s a valid question! However, renovations are a double-edged sword.
Today’s market has record-high home prices. Chances are, these renovations will raise the value of your home, but they won’t do as much as you first hoped, especially if you don’t want to sell this year. In a market like today’s, it is extremely difficult to know the real market value of your home, compared to the current inflated value of your home. This makes it extremely easy to accidentally price your home out of its neighborhood.
On top of that, you always have to consider your return on investment (ROI) of any given renovation project. Historically, certain projects, such as kitchen and bathroom upgrades, have shown the greatest ROI. However, it can be difficult to find an accurate ROI in a few years when your home’s value has increased significantly in the past few years.
The short of it is that the value of your home may be at the top of what your neighborhood can support. By adding renovations to your home that increase the market value, you could easily run the risk of having a negative ROI and pricing your home out of its location.
Should You Sell Your Home?
Instead of renovating, is it more profitable to sell your home and buy one that fits your needs? The answer is tricky: home values are higher than they have ever been.
Home prices rose 18.8% in 2021, according to the S&P CoreLogic Case-Shiller US National Home Price Index, the biggest increase in 34 years. Phoenix had some of the highest gains in the country with prices 32.5% higher than the year before.
That sounds great, right? It can be! Just remember that you will likely be purchasing a home or renting at these higher prices, thus digging into your profits or delaying your buying efforts.
Let’s break all of this down into one example. In 2019, a 3-bedroom, 2.5 bathroom home in the Phoenix Valley was valued at $350,000. This example home was built in 1980. In 2022, the same home without any renovations is now valued at $500,000. For the sake of this example, that value is fair to the current economy, thus making this home gain $150K in value in 3 years.
You can expect to see the same inflation across the Phoenix Valley – you may sell your home for a $150K profit, but you can expect to spend more for the same sized home in a similar area and have to deal with the higher-than-average bids from competing buyers.
The ‘Love it or List it’ Problem
There is no cut and dry answer to this problem. Renovations can be risky in today’s market, but so can be selling your home with the intention of buying another.
First and foremost, we recommend doing what is right for you. However, it may be smart to hold off any major renovations until the market settles.
If you’re looking to sell and have no intention of buying in the same area, or if you have a good deal in place, then it would be smart to sell! In addition, if you’re looking to buy and live in that home for a long time – 5+ years – then it may be smart to sell your home as well.
However, if you’re concerned that you need to make renovations before you sell, you might want to consider selling your home to Property Spot. No renovations or repairs are needed and you will get a fair cash offer within 24 hours – no market fees, no commission fees, and no wait to find the right buyer. Visit us online or give Property Spot a call at 480-400-7792 to start the process and to get your fair cash offer quickly!